the future of commercial auto

2020: A New Beginning for Commercial Auto Insurance

23 Sep 2019

It’s no secret that automotive insurance is a notoriously slow-moving industry. And this causes headaches not just for customers, but for providers, as well.

Delays are endemic to traditional insurance models. But with the onset of of artificial intelligence, new technology promises to limit the financial impact of these delays, and potentially bolster providers’ bottom lines.

Manual Data Collection, Fraud, and Delays

Paperwork is king in traditional insurance operations, and with it comes problematic delays.

From the reliance upon drivers’ motor vehicle records – which experience delays at both the point of accident and ticket reporting to the DMV, as well as the transmission of those files from the DMV – to the manual notification of loss and claims information from specific incidents, most insurance providers are often several steps, and several days, behind the reality of their insureds.

And when it comes to fraud and claims processing, these delays become more financially damaging. The longer it takes for a provider to receive notification of a claim after an incident, the greater the opportunity and likelihood of that claim to undergo buildup or outright fraud. On average, insurers identify fraud in 7.4 percent of cases within the first 125 days; in claims processed after that window, that number jumps to over 21 percent. In fact, according to the Coalition Against Insurance Fraud, many fraudsters file a small initial claim, then later file a larger, fraudulent multi-feature claim many weeks later.

For most providers, the process of delayed claims looks like this: an accident occurs. Time passes, often a week or more. The customer finally files the claim. The customer provides information about the accident based on their best guesses. Maybe they’re telling the whole truth, or maybe they’re not. If the claim is even slightly complex, or if the provider suspects fraud, the insurer sends out an adjuster to examine the vehicle and interview the driver. The parties file a revised claim.

For lucky companies, that’s the end of it. But for many, the next step is lengthy and enormously costly litigation in the event of fraud or a contested claim.

This is likely the reason that insurers report detecting fraud before claims are paid, and improving fraud-detecting analytics, as their top fraud-fighting priorities.

Traditional Industries Speeding Up With Automation

But automation enabled by technology may hold the key to closing these opportunities for fraud, and improving the overall speed of insurance processing.

We’re already seeing other large, inertia-saddled industries leveraging technology to automate and speed up their experiences. Amazon’s “Go” retail stores famously have no cashiers or security, and use machine learning and censors to automate the entire payment process so customers simply walk in, and walk out with their desired products. Even the US Postal Service is embracing automation to allow customers to print their own shipping labels and avoid time-consuming trips to the post office. And car sellers like Carvana are leveraging automation to totally upend the traditional car-buying workflows of dealerships, offering to-your-door delivery and even “car vending machines.”

If even the post office can speed up with automation, it is time for insurance to catch up. And the good news is, it has already begun.

Technology for Faster, Smarter Insurance

The push towards automation in auto insurance began with on-board diagnostics (OBD) and the move towards usage-based insurance (UBI).

And while these plug-in diagnostic dongles automated the collection of data, they did little to speed up the actual processing of claims. The data still needed to be delivered from the customer to the provider by manually uploading it to a computer or mailing in the physical dongle itself. Next, providers like Progressive added smartphone apps to their OBD programs in order to facilitate this data transmission.

But even these moves towards automation are just a drop in the bucket in the broader volume of insurance claims processing, due primarily to the lack of mass-market OBD penetration. Hardware costs, installation hassles, and general lack of awareness among consumers are the chief reasons that traditional models still make up the majority of policies.

And while these OBD devices do measure some things like rapid acceleration, excessive speeding, and hard braking, they miss large amounts of significant, relevant claims data – especially about driver behavior leading up to a crash.

The future, then, is smartphone-based telematics. Using AI and machine learning, combined with the advanced sensors standard on most modern smartphones, these telematics solutions turn drivers’ devices into automated claims adjusters.

Not only do smartphone sensors measure data about 13 of 14 driving risk factors just as or more accurately than OBDs, but because they are smartphone-based, they can also automatically measure relevant claims information OBDs can’t, like distracted driving (which accounts for 30 percent of collisions) and comparison to posted speed limits.

With all of this data already living within a customer’s device, enabling it to automatically populate a claim, electronically file said claim, diagnose fault, and eliminate all of the surrounding paperwork is as easy as writing a few lines of code. And because the device’s data sensors and the solution’s AI tell the whole, true story of what happened, invalidating fraud becomes as simple as checking the numbers.

We are already beginning to see this in the market. In South America, Grupo Sura is beginning to leverage telematics data for automated claims processing. And in North America, Fairmatic uses telematics to offer behavior-based insurance (BBI) policies and claims processing.

The Future of the Industry

These solutions are already leveraging AI and machine learning, which becomes more accurate, reliable, and predictive the more data it has. That’s why we expect an auto insurance industry that will only grow faster and more automated, starting today.

We envision an industry where claims are paid faster, fraud is reduced to the point that it becomes a thing of the past, and even ambulances and tow trucks can be dispatched to customers automatically. And those are just the things we can imagine today.

The future of auto insurance is here, it is automated, and it is very bright.

Rhea Harris

General Manager